Prof Charles Soludo did not after all make the type of history that, before May 2007, he appeared to be on his way to making. I don't think anyone has ever had more than one spell at the helm at the Central Bank of Nigeria (CBN). Just three months into Yar'Adua's administration, it became obvious that Soludo was going to be kicked out. Yes, Soludo was finally put out of his misery and put out to pasture last Monday 1 June 2009.
In the USA, the long standing number one economy in the world, when it comes to fiscal policy, stability is the watchword: Alan Greenspan was the Chairman of that country's Federal Reserve from 1987 – 2006 spanning the presidencies of Regan, Bush Snr, Clinton, and Bush Jnr. Across the pond in the UK, Sir Montagu Norman served as the Governor of the Bank of England from 1920 – 1944 covering the tenure of 10 Prime Ministers (must have been a rough political time for the Brits!) and Lord Cameron Cobbold served from 1949 – 1961. And since 1973, Governors of the Bank of England have served a minimum of 10 years in office. It is not that these countries did not have bosses of their apex banks who served short terms or just one term, the point is that proven successes were retained in the post for obvious reasons.
In Nigeria, we reward success with aggravation, condescension and, sometimes, demotion. Na today? Is that not how we routinely pick the head of our Customs' service? OBJ did it to Dr Ngozi Okonjo-Iweala, and Yar'Adua did same to Ribadu not too long ago.
Soludo was very easily the best, the most articulate, competent, relevantly qualified and the most productively active person to have occupied the chair of the Governor of CBN. Together with Okonjo-Iweala, he put a proper structure to Nigeria's fiscal policy for perhaps the first time in her history. But when in 2007 he brought about a convergence between the official exchange rate and the unofficial market rates, he was immediately at daggers-drawn with the black market traders and their nefarious partners in the financial sector. Interestingly, this was when concerted stories about Soludo's corrupt dealings began to hit the media. But Soludo never claimed to be perfect – I mean, he is a Nigerian official. He then compounded matters a few months later by announcing a positive initiative to re-denominate the Naira. That was it. He had gone too far to antagonise the un-antagonisables. Yar'Adua immediately removed him from his National Economic Management Team and Soludo has been in the cooler ever since. But what were his other sins?
Well, the first time I think almost everyone took notice of the “governor of the central bank” in Nigeria was back in 2004 when he initiated the consolidation exercise of our banks. That exercise (which not a few people doubted, was lampooned and, in some very high quarters, declared as unworkable and dead on arrival) was successfully concluded by December 2005. This is what the bank consolidation programme has delivered as at September 2008 – just four years: All the banks in the country are robust with shareholders funds of about N2.7 trillion. This is some 822% higher than the N293 billion cumulative funds of the 89 existing banks pre consolidation. Furthermore, the number of bank branches nationwide rose from 3,247 in 2004 to 5,247 in 2008. Similarly, the number of the foreign branches of Nigerian banks increased from 7 in 2004 to 69 in 2008.
Just as it had done with the commercial banks, the CBN in 2006 launched the Micro Finance Bank (MFB) scheme to replace Babaginda's community banking system and fixed the capital base for operation at N20 million. Today, the country has more than 900 MFBs that are providing credit facilities to the poor without collateral. The CBN also backed up the MFBs with the establishment of entrepreneurial development centres to teach the poor how to manage finance profitably. Afterwards, CBN brought the MFBs under its direct supervision and the deposit cover of the Nigeria Deposit Insurance Co-operation, NDIC.
The enhanced banking supervision and enforcement of corporate governance by the CBN under Soludo reduced the percentage of non-performing loans in the banking sector from 21.6% in 2004 to 6.2% in 2008. The CBN also launched the electronic Financial Analysis and Surveillance System, e-FASS, which enables it to monitor transactions in the commercial banks without being physically there.
All of these led to the increased professionalism of our banks and tremendous manpower growth. Concomitant with this was the introduction of more robust IT applications (including ATMs and internet banking) in the Nigerian banking sector.
Under Soludo, the long ailing Nigeria Security Printing and Minting Company (NSPMC) was acquired by the CBN in 2004 and by 2007, the NSPMC has been transformed into a profitable venture and also saved the country the dishonour and national security risk of perpetually relying on importation to meet its currency needs. Today, the NSPMC is not only satisfying the country's currency needs, it also handles other security printing works for the government and the private sector. Other West African countries - like Ghana, for example - have similarly approached the NSPMC for business.
Though the CBN tried to re-introduce the use of coins, that policy has so far been unsuccessful as Nigerians are still unable/unwilling to use the coins for business transactions.
But predictably, since Soludo was stopped dead in his tracks by Yar'Adua as soon as the latter stole into office, things have been changing. When Soludo assumed the leadership of the CBN, inflation rate was 10%. It went up to 11% in 2005 before declining to 8.5% in 2006 and 6.4% in 2007. In 2008, inflation was up again hovering around 12%. GDP that achieved a steady growth between 2004 and 2007 and in fact grew at 6.2% in 2007 only grew by 0.8% in 2008. Our foreign reserve rose from $11.44 billion in June 2004 to $60.89 billion in August 2007. That reserve is currently near extinct. The Naira is falling again to a weak Dollar and to an even weaker Pound Sterling. Yar'Adua and his economic team have expended most of our foreign reserves trying to defend the Naira. In 2009 alone, the Naira has lost some 30% of its value.
Once one of the world's most profitable Stock Markets, foreign and local investors are now divesting from the Nigerian capital market. Two years in, you'll have to ask: What is our economic policy?
Soludo was very successful at his job and he was recognized accordingly. In November 2008 he was appointed to a high-level United Nations' task force (the Commission of Experts on Reforms of the International Monetary and Financial System) to examine the reform of the global financial system, including the IMF and the World Bank, in the wake of the current economic turmoil. The seven member task force as announced by the United Nations General Assembly President Miguel Descoto, was chaired by Joseph Stiglitz, a former Chief Economist at the World Bank and winner of the Nobel Prize for Economics. Descoto said Soludo was appointed to the task force on the basis of the successful work he did in revamping the banking sector in Nigeria. He added that that market-induced consolidation exercise has helped save Nigerian banks from the current global financial crises that have seen the US and European governments pump several billions of Dollars into their economy to bail out their respective financial institutions.
In London 2006, Soludo won the world's most prestigious banking award, 'The Banker magazine's Global Central Banker of the Year' award. This is the pinnacle in terms of achievement that the Governor of any Central Bank in the world can hope to achieve. It was a first for Nigeria.
But a good man is not recognised in his home. After sacking Soludo, Yar'Adua asked the Senate to confirm the appointment of the CBN Deputy Governor for a second term and Sanusi Lamido was appointed the CBN Governor.
Curiously, as Soludo was being prepped for removal, the following were the only seriously considered candidates as his replacement: Falalu Bello from Kaduna State who is Chief Executive of Unity Bank; Mohammed Hayatudeen from Bornu State who is the former chief executive of FSB International Bank; Obadiah Mailafia from Kaduna State who is currently head of Nigeria's Centre for Policy and Economic Research; Lamido Sanusi from Kano State who only took over as Managing Director of First Bank January this year after previously serving as Head of Risk Management; Yakubu Tanimu from Katsina State who has been Chief Economic Adviser to Yar'Adua since May 2007; Atedo Peterside from River State who is Chairman of Stanbic IBTC Plc, the Nigerian subsidiary of Standard Bank of South Africa; and Shamsuddeen Usman also from Kano State who was a failed Finance Minister but nevertheless is the current Planning Minister with the responsibility for making us a top twenty economy by the year 2020.
Reading through Sanusi's bio, it would appear that he obtained his BSc at the age of 19, and MSc at 21. Hhmm. Very impressive. At 39, the man headed to Sudan's International University of Africa, where he took a diploma in Sharia and Islamic Studies. He was the Managing Director of First Bank for all of five months before being appointed to the governorship of CBN. I have read a couple of his articles on GAMJI, the online forum. Sanusi is very articulate and comes across as very intelligent – an intellectual of sort. However, the man is a deep, deep political animal with a revisionist bent. He is a rabid Islamist who has always insisted that his Islamic faith comes before everything else.
It is now this man's lot to formulate fiscal policies for ALL of us. I hope we are not entering an era where we have to be extra vigilant about the CBN or completely lose interest. Hopefully, the Naira would not revert to carrying exclusive Arabic inscriptions. Since Soludo got shackled, investors have put everything on hold to see what is going to happen at the CBN. Those of us who have some financial investments in Nigeria are holding our breaths and hoping for the best. We can only pray that we are not headed back to the era of three different exchange rates.
Just last month, May 2009, First Bank donated N20million to Anne's Nursery and Primary School, Kaduna, at the celebration of that school's 50th anniversary. St Anne's is Sanusi's alma mater.
Originating at www.huhuonline.com